Political momentum is still in President Temer's favor as he pushes head with the austerity agenda that has drawn opposition into the streets

Brazil's president Michel Temer and senior lawmakers were unwavering in their support for a major pension reform on Wednesday despite nationwide protests against the proposal and the dramatic expansion of a graft probe threatening the ruling coalition.

Moody's Investors Service added a vote of confidence in the government, citing the ongoing progress of fiscal reforms as a reason for revising its outlook for Brazil's sovereign credit rating to stable from negative.

Brazil's currency and benchmark stock index both rose around 2.0% on Wednesday, leading a rally in Latin American assets after the U.S. Federal Reserve signaled a gradual pace for interest rate rises.

Wednesday's developments underscored that the political momentum is still in President Temer's favor as he pushes head with an unpopular austerity agenda that has drawn opposition into the streets but retained the support of congressional leaders.

The public backing from legislative allies was particularly important after Brazil's top public prosecutor moved on Tuesday to target dozens of senior politicians as part of a corruption probe centered on kickbacks at state oil company Petrobras.

Despite the snowballing investigation and well-organized union resistance, Thomaz Favaro, a political analyst with global consultancy Control Risks, said Temer has built a more robust coalition than his predecessor, Dilma Rousseff, who was impeached last year as the Petrobras scandal gained steam.

The coalition behind Temer has proven to be more stable than Dilma's and will continue to be so despite corruption investigations, due to the degree of ideological affinity that unites it on business initiatives and concern for Brazil's fiscal position, he said.

Asked if the scandal would interfere with the legislative calendar, Senate President Eunicio Oliveira and House Speaker Rodrigo Maia said nothing had changed. Both said investigations would give a chance to clarify allegations in the press.

Their steadfast support contrasted with rowdy demonstrations that occupied the finance ministry in the capital Brasilia and snarled traffic in the business hub of Sao Paulo to protest Temer's proposed reforms.

The impact of a strike by public transportation workers was lighter than anticipated in Rio de Janeiro and other smaller cities. Still, an afternoon march drew tens of thousands to a midtown thoroughfare in Sao Paulo, highlighting well organized union resistance to limiting pension benefits and raising the retirement age as the government has proposed.

A smaller demonstration in Rio was marked by clashes between masked protestors and police, who used tear gas to control the crowd.

Temer told small business owners in Brasilia on Wednesday that pension reform was essential to lifting the economy from its worst slump on record and closing a huge fiscal deficit before it triggered an even deeper crisis.

We can't do something too modest now or in four or five years we'll have to follow the example of Portugal, Spain, Greece and other countries that had to make a much bigger cut because they didn't take preventative measures, he said.

What surprises me - well, not really - is the fact that Brazilians are extremely passionate over football and carnival, and will take the day off from work - without permission - to protest against the reform of the social security system, which they don't really understand - but percieve as a threat to their future, yet, they didn't/don't react in the same way when they found out that the PT and other parties / the politicians were stealing, literally billions from them - money badly needed for public health and education - and are the ones who are compromising their and their kids future.....it seems most of these protesting idiots can't get their priorities right.....too bad for them, and can't wait to see when the time comes for them to retire (if the current system isn't changed) and the government says sorry, you can't, 'cause we have no more money....